pip_train

Educational: Momentum Shifts and Connecting Multiple Time Frames

FX:EURUSD   Euro Fx/U.S. Dollar
222 15 5
I've spent many years learning what I am sharing with you. I've read most of the books out there on various styles of trading and nothing comes close to explaining how markets move the way progression trading does. People have a tendency to argue about things they don't have a firm grasp on. That's OK, I was that person some years ago, and still am to some degree today. Sometimes arguing with someone is the best way to get them to teach you what you do no know, but be humble and let your ego die when they do take the time to teach you. Take this for what it's worth, because it's worth more than you probably realize at this time. Diving right in:

I've stated that most people learn to draw Fibs incorrectly. Teachers perpetuate incorrectness because they've had marginal success and teach others what they've learned. Teachers tend to tell you to draw from swing high to swing low and visa versa. This is fallacy; draw from a level of support last gained or lost to a swing high or swing low. I will say this now, and until I cannot speak: Fib levels are nothing more than significant levels of support and resistance . I drew them on the chart for those of you that are realizing your way is not quite as adequate as you like, and to help you understand that eventually, you no longer will need them. Additionally, it was also convenient to use the tool to help illustrate the point of this lesson.

If you've studied this chart, I made it as concise as possible, you may notice that I included two separate time frames, working together. The left depicts the 4Hr chart, illustrating the leg that price is currently concerned in retracing. The right illustrates how momentum shifts as we approach the support lost level of significance. Momentum is generated across time frames. Momentum is the stuff that creates trends. If a trend is to reverse, momentum must get dispersed first.

When prices bounces and is in a short term up move, as it approaches a level of significance, it must distribute. Price distributes on the way up to a support lost, and accumulates down to a support gained. Either way, prices will begin a sideways pattern or a wedge pattern. If you're smart, you may have just picked up on something else: patterns are nothing more than either accumulation or distribution, which is the vehicle that drives momentum shifts as a significant level is approaching.

I cringe at the terms people sometimes use, "the market is sideways, it's waiting to make up it's mind." This is illogical nonsense. As I just said, price is sideways because it is either accumulating or distributing so that it can reverse off a significant level of support that was gained or lost and left untested.

Maybe you think I just got lucky. Actually, I tried to explain this rejection to another user who also has a bad habit of drawing Fibs incorrectly.
snapshot


I've also included a MACD on the smaller time frame chart to help you visualize distribution or momentum changing. This is the only time I use MACD . It helps confirm a divergence. Why does divergence happen? Because momentum is shifting along multiple time frames.




BhaktaBasics
a month ago
Appreciate the information on distribution and accumulation, it is interesting. A couple of questions spring to mind based on the above which you might be able to clear up. You state that the first support was lost around the 1.14 area, why is that level a support lost? (is it because it was tested and rejected around 11th Sep i.e. support turned resistance?). Also, you mentioned that the 'first touch will get rejected' around the 1.114 area. Does this mean it won't ever sail through that previous lost support? or are you suggesting that it will be back to re-test again?
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pip_train PRO BhaktaBasics
a month ago
Before support gain be lost it must have first been gained. If you look back you can see all the times that level was respected. I circled where it was gained and lost multiple times. Because I knew it was a level, and that it was lost and never tested, price would have to come back and test it. This is the rule, it's not important for you to know why it's the rule. Just know that is the rule. On the higher timeframes, price will likely go through that level again the next time it tests it because it will become a 2nd test, assuming there is enough momentum to support it.

I posted that chart over the weekend to help someone understand how to draw Fibs. Very few people seem to understand how S/R are gained and lost. Your objective once you learn, is to trade first tests, because they success rate is near 100%.
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BhaktaBasics pip_train
a month ago
OK understood but there are many many levels of interest (depending on which time frame you use). Trying to determine which are significant would be tricky and certainly not help in determining the next direction of the market. Where do you see EURUSD heading now ...
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pip_train PRO BhaktaBasics
a month ago
Use time frames together. Larger time frames lead you to smaller, so that you can find the exact level untested. 1029-36 area looks interesting. Wonder what will happen...
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BhaktaBasics pip_train
a month ago
It might break, it might bounce briefly and then break or it might bounce back up to 1.115 area. That's the point ... these areas of interest aren't actually helping make a useful trade. Although I admit the bounce off 1.115 was tradable. What I'm trying to get at is if you can indicate the next area of significant (untested?) support that it will bounce off ... before the fact.
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pip_train PRO BhaktaBasics
a month ago
Ofcourse you can. Does my chart prove that you can? The rule is move from significant untested support gained to untested support lost and visa versa. If you can figure out where those levels are you, you will make lots and lots of pips.
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BhaktaBasics pip_train
a month ago
Your chart definitely shows you can pick support and resistance levels on a chart with existing price information but can it tell direction to the right of the chart (which is what we're all trying to do). So as an example what is the next likely direction for eurusd based on those key levels of interest? As I must admit at the moment I see a lot of levels but nothing that helps me determine direction since levels are regularly gained and lost.
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pip_train PRO BhaktaBasics
a month ago
Scroll up in the comments to the chart I posted saying it would get rejected. Pay attention to only the levels contained in the leg you are in and the leg you are retracing.
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pip_train PRO pip_train
a month ago
Well, what happened at 1029-36? Did we pop?
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BhaktaBasics pip_train
a month ago
@pip_train, Yup, about 30 pips and then down through it and then back up through it and then subsequently down through it again. Not sure how that is useful in trading, although i suppose the volatility with the election wouldn't have helped matters.
Taking a live example then, looking at the current leg (post election) am i interpreting correctly that a key level of support gained/lost is the 1.099 area which should now be retested and rejected (on first test)?
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pip_train PRO BhaktaBasics
a month ago
@BhaktaBasics, Is 30 pips not a significant amount for you? It is for me I'll take 30 pips all day long, everyday. I have somewhere around 1090 up there as a significant level lost, although it may take a while to get back up there.
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BhaktaBasics pip_train
a month ago
@pip_train, I think everyone would take 30 pips if they knew it was going to be 30 pips ... but we don't know ... assuming it bounced, it could have been up by 10 pips or 20 or more before turning so you wouldn't know when to take the profit. Therefore, the only usable way to trade that bounce and take some profit is perhaps with a tight trailing stop loss. Unless you have a predetermined number of pips profit as part of your strategy.
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pip_train PRO BhaktaBasics
a month ago
@BhaktaBasics, Ofcourse there is a target. We do know where price will bounce to. Here were the reasonable target levels you could have taken profit on. I highlighted why those areas were the potential targets. I probably would have gotten out around the first area just to be safe.
snapshot
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BhaktaBasics pip_train
a month ago
@pip_train, Understood. Points very well made and appreciated.
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maksheetal
a month ago
This is great, thank you for sharing, will try it out.
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